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Warning: Mortgages surge to post-2008 peak, New Financial Crisis ahead?

The proportion of low-deposit mortgages associated with the financial crisis has hit its highest level since 2008, the Bank of England recently said.

Almost 6% of mortgages granted in the third quarter of 2019 had a loan-to-value ratio of more than 90%, meaning that borrowers had to stump up a deposit equivalent to just 10% or less of the value of the mortgage.

The granting of these types of mortgages is now at its highest since the last quarter of 2008, something that will likely prompt concerns about the sustainability of the mortgage market, writes Edmund Heaphy, first published at Yahoo Finance.

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The number of mortgages granted with just a 5% or 10% deposit has plummeted since the financial crisis, but they are recently experiencing something of a resurgence.

Bumper, low-deposit mortgages were popular in the years before the crash, leading to many over-leveraged homeowners.

But many lenders now offer mortgage products that require just a 10% deposit.

At the same time, the proportion of mortgages being granted with a 25% deposit or less has also increased, the Bank of England said. Rates on mortgages are currently close to record low levels, largely due to intense competition between banks.

The so-called “big six” banks — Lloyds Banking Group, Nationwide Building Society, RBS, Santander, Barclays, and HSBC — currently account for more than 70% of the UK mortgage market.

Overall, these banks provided nearly £12bn of new lending in 2018. Ahead of the general election, uncertainty has led many people to put off moving or buying a home.

RICS residential market data showed that new buyer enquiries fell for the second consecutive month in October, while agreed sales also fell. But that data came before the Halifax House Price Index revealed that the UK property market showed signs of recovery in November, with house prices growing by the most in nine months.

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